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The demand for heavy loans can cause ____________?

When the demand for heavy loans increases, banks may experience a deficiency of funds because a large portion of their reserves is allocated to lending. This situation can lead to tighter liquidity and higher borrowing costs in the market.... Read More

1 FINANCE MCQS

The demand for heavy loans can cause ____________?

  • Excess funds for banks
  • Deficiencies for banks
  • Organized reservation
  • Competitive reservations
Correct Answer: B. Deficiencies for banks

Detailed Explanation

When the demand for heavy loans increases, banks may experience a deficiency of funds because a large portion of their reserves is allocated to lending. This situation can lead to tighter liquidity and higher borrowing costs in the market.

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